Is the notion of retiring in your 60s a misguided expectation?
Before the Digital Age, most people went to work as soon as they were physically able to. People worked until they died — spending their lifetime in a farm, workshop, factory, or military.
If you got sick, relatives supported you until you died. Because family was the only safety net for most laborers, people worked all the time — from sunrise to sundown.
Labor, and the income people derived from it, served as a hedge against calamities such as famine, war, or industry downturns. Thus, people strove to accumulate capital to prepare for adversity.
Though historians may find the rare exemption, monarchies certainly did not “bail out” their subjects.
Diminishing Safety Nets
A paradigm shift occurred in the past century: Americans began to expect to retire in their 60s.
The government created entitlements such as Social Security, unemployment benefits, Medicare, Medicaid, food stamps, subsidized housing, farm subsidies, disaster relief, industry bailouts, and other resources.
More citizens began to rely on institutions for cash, food, supplement, and economic safety — and the dependence led to an unfortunate misconception. Billions in public assistance caused many Americans to calculate that they could get by with less savings (and income) in their later years.
However, statistics show the vast majority of Americans cannot afford to retire.
The average retirement savings of a 50-year-old is merely $43,797, according to research compiled by Statistic Brain, which includes data from the U.S. Census Bureau, Saperston, and Bankrate.
Only 4 percent of Americans who started working at the age of 25 will have an adequate nest egg by age 65. And nearly 63 percent of Americans will be dependent on entitlement programs, friends, relatives, or charity when they turn 65.
The nation’s elderly are becoming economically vulnerable because government programs — such as Social Security and Medicare — risk insolvency within a decade or so, especially as baby boomers become a larger percent of the U.S. population.
Wall Street’s Fantasy
Bob Richards, the publisher of the Retirement Income blog, suggests that Wall Street is partly responsible for selling Americans the idea that they can retire in their 60s. He argues that people should work for 10 or 20 more years, or as long as they are capable of making contributions as a productive member of the labor force.
“The reason you see so many articles about retirement savings is that Wall Street is very good at feeding information to the press and the press repeats it …. Wall Street is interested in ‘money under management’,” says Richards.
Wall Street makes more profit the more capital it manages.
“Mutual fund companies are interested in gathering as much assets as possible from the public because the fund industry charges 1 [percent] or more … to manage your account, says Richards. “You pay that fee whether you make money or not.”
Controlling One’s Fate
By working beyond their 60s, older Americans can control their fate without relying on the electoral planks of politicians. The elderly, including Baby Boomers, can obtain additional income (and peace of mind) through a part-time job, small business, and investments that generate passive income (such as corporate bonds or real estate).
Working an additional 10 or 20 years provides a boost to one’s nest egg, and ensures a higher standard of living. It can provide immunity from the vagaries of entitlement cuts and reductions in jobless benefits. Honest work provides the self-esteem that food stamps and other handouts cannot.
Millions of modern workers are reducing the number of years in which they are productive. Young adolescents wait until their early 20s, when they finish college, to enter the workforce.
Most recent grads start their working lives in significant debt through school loans, car debt, and mortgage. Many fantasize that they can retire early.
Facts do not support such economic optimism. For thousands of years, man worked as soon as he was able to. He prepared for the worst and worked until he died.
Should we now believe that the world owes us a comfortable retirement?